Why We Are at the Start of a Multi-Year Gold Bull Market
Why We Are at the Start of a Multi-Year Gold Bull Market
Comprehensive analysis revealing why gold has broken multiyear resistance and is positioned for sustained gains driven by debt saturation and declining trust in credit instruments
Executive Summary
Recently, the dollar gold price aggressively broke a multiyear resistance level on the back of escalating wars, worrying asset bubbles, and sticky inflation. Long-term indicators demonstrate that gold is fundamentally undervalued under these circumstances and can easily double in price over the coming years.
The past decades have been characterized by elevated trust in credit instruments that inflated the global financial system to colossal proportions. Now tensions between East and West, debt saturation, and persistent inflation are eroding this trust. The balance between financial instruments with counterparty risk (credit) and those without counterparty risk (gold) will undergo a significant adjustment process favoring gold accumulation and higher prices.
Bull Market Breakout
From a technical perspective, gold has broken out from a multi-year consolidation phase. Historical precedent suggests we are now entering a multi-year bull market with substantial upside potential based on fundamental indicators and declining trust in credit instruments.
Table of Contents
- The theory of money and Exter's inverse pyramid
- New multi-year gold bull market has begun
- Long-term fundamental indicators
- Gold vs. global financial assets analysis
- US monetary gold and money supply ratios
- International reserves and de-dollarization
- Equity market cycles and currency debasement
- Market outlook and price projections
The theory of money and Exter's inverse pyramid
As J.P. Morgan testified before Congress in 1912: "Money is gold, and nothing else." While all moneys are backed by trust and social agreement—whether tobacco, salt, paper slips, silver, or book entries—not all moneys are equal. Since the late 19th century, gold has been officially recognized as the only form of money that is universally accepted, carries no counterparty risk, and therefore underpins the global financial system.
Exter's Inverse Pyramid Structure
- Gold at the base - ultimate money with no counterparty risk
- National currencies above gold
- Debt securities in the middle layers
- Equity and derivatives at the top
Financial Asset Hierarchy
- Assets closer to base are more "money-like"
- Higher layers represent increasing credit risk
- Horizontal expansion shows leverage increases
- Vertical quality reflects asset trustworthiness
Debt Cycle Dynamics
- Credit expansion widens pyramid top
- Economic booms enlarge upper layers
- Recessions shrink credit, gold price rises
- Pyramid reshapes with debt cycles
Credit vs. Gold Balance
In moderation, credit benefits capitalist economies—too much debt results in lower growth, while too little means foregone opportunities. However, during crises, people consistently demonstrate more trust in gold than credit instruments. Since everything above gold can be created from thin air, the pyramid's top can be easily widened, creating boom-bust cycles that ultimately favor gold appreciation.
Current Debt Cycle Position
Ratios between gold and credit assets indicate we're currently in a boom phase with gold as a share of global financial assets at low levels, US money supply overstretched relative to gold backing, and equity valuations at extreme highs. Simultaneously, trust in credit instruments is waning, suggesting significant gold price appreciation ahead.
New multi-year gold bull market has begun
From a technical perspective, gold has broken out from a multi-year consolidation phase. Using historical precedent as our guide, this breakout signals the beginning of a new multi-year bull market with substantial fundamental support from long-term indicators showing gold's undervaluation.
Technical Breakout
Gold price analysis from the 1960s through 2024 reveals a clear breakout from multiyear resistance levels. Historical patterns suggest this technical development typically precedes sustained bull market advances lasting several years.
Fundamental Support
Long-term fundamental indicators demonstrate gold's undervaluation relative to expanding credit instruments. Key metrics show gold at historically low ratios compared to global financial assets, money supply, and international reserves.
Catalyst Convergence
Escalating geopolitical tensions, persistent inflation above central bank targets, asset bubble concerns, and declining trust in traditional credit instruments create unprecedented support for sustained gold appreciation.
Historical Context
Previous periods when trust in credit deteriorated—during World War II and the late 1970s—witnessed gold's value relative to financial assets reach 7-10%. Currently trading at just 3% of global financial assets, gold shows ample upside potential for this bull market cycle.
Long-term fundamental indicators
Multiple long-term indicators demonstrate gold's undervaluation relative to expanding credit instruments. Using methodology similar to Bridgewater Associates' analysis from 1924-2020, extended data series reveal gold currently represents only 3% of global financial assets—significantly below the 7-10% levels reached during previous periods of credit stress.
| Fundamental Indicator | Current Level | Historical Crisis Levels | Upside Potential |
|---|---|---|---|
| Gold % of Global Financial Assets | 3% | 7-10% (WWII, 1970s) | 130-230% |
| US Monetary Gold/Money Supply | Near historic low | Previous lows: 1971, 2000 | Bull markets followed |
| Gold % of International Reserves | Rising from lows | Classical gold standard: 80%+ | Significant structural shift |
| US Equity/GDP Ratio | Near peak levels | Bubble peaks historically | Currency debasement cycle |
Bridgewater Methodology
Analysis using estimates similar to Bridgewater Associates on the ratio between gold and financial assets (gold, debt, and equity) from 1924 through 2020, extended with recent data to capture current market conditions.
Money Supply Analysis
The value of US monetary gold relative to broad money supply (M2) is rising from near historic lows. Previous lows in 1971 and 2000 preceded major multi-year gold bull markets.
Reserve Currency Decline
The dollar's reserve currency status is slowly declining, making the relationship between gold and foreign exchange increasingly important for understanding future monetary system evolution.
Crisis Period Comparisons
During periods when trust in credit instruments deteriorated—notably World War II and the late 1970s—gold's value relative to financial assets reached 7-10%. This historical precedent suggests substantial upside potential from current levels, where gold represents only 3% of global financial assets despite growing credit system stress.
Gold vs. global financial assets analysis
Historical analysis of gold's share of global financial assets provides crucial insight into current market positioning. While complete global data spanning 150 years remains unavailable, estimates using Bridgewater Associates' methodology reveal gold's dramatic undervaluation relative to expanded credit instruments.
Global Financial Asset Composition
The analysis encompasses gold, debt, and equity to determine gold's percentage of total financial assets. This methodology, developed by Bridgewater and extended through recent years, shows gold currently at 3% of global financial assets—well below historical crisis levels of 7-10% reached during periods of credit stress and monetary uncertainty.
Historical Crisis Periods
- World War II: Gold reached 7-10% of financial assets
- Late 1970s: Similar 7-10% peak during inflation crisis
- Credit stress correlation: Higher gold ratios during trust breakdown
- System rebalancing: Gold gains during deleveraging cycles
Current Market Position
- Current level: 3% of global financial assets
- Credit expansion: Massive growth in debt instruments
- Asset bubbles: Inflated equity and bond valuations
- Trust erosion: Growing concerns about counterparty risk
Upside Potential
- Conservative target: 7% would represent 130% gain
- Crisis level: 10% suggests 230% upside potential
- Rebalancing: Natural adjustment process underway
- Structural shift: Favors gold accumulation
Methodology Note
While finding complete global financial asset data spanning 150 years proves impossible, the available estimates using Bridgewater's proven methodology provide robust insight into gold's relative valuation. The consistency of crisis-period ratios across different historical periods strengthens confidence in these analytical frameworks.
US monetary gold and money supply ratios
Examining the value of US monetary gold relative to the broad money supply provides critical insight into the dollar's gold backing and potential price appreciation. As the world's reserve currency, the dollar's relationship with gold carries particular significance for global monetary stability.
Historic Low Analysis
- Current ratio rising from near historic low
- Previous lows occurred in 1971 and 2000
- Both periods preceded major gold bull markets
- Pattern suggests new bull market beginning
Money Supply Implications
- M2 money supply expanded dramatically
- Gold reserves remained relatively static
- Ratio indicates extreme monetary debasement
- Correction favors higher gold prices
Reserve Currency Status
- Dollar's global role creates unique dynamics
- International gold price pressure
- Foreign central bank gold accumulation
- Gradual de-dollarization trend emerging
Historical Precedent
The pattern of monetary gold ratios reaching historic lows followed by sustained bull markets provides strong precedent for current conditions. The 1971 low preceded gold's rise from $35 to over $800 per ounce, while the 2000 low was followed by gold's advance from under $300 to over $1,900. Current ratios suggest similar potential for dramatic appreciation.
Monetary Debasement Risk
The extreme divergence between money supply growth and static gold reserves indicates severe monetary debasement. With global debt levels at record highs and persistent inflation, the most expedient method of debt restructuring involves currency devaluation—a process that historically benefits gold prices significantly.
International reserves and de-dollarization
Gold's share of global international reserves is currently rising, representing a form of de-dollarization driven by trust erosion in traditional reserve currencies. This trend accelerated after the freezing of Russian assets worth $300 billion since the Ukraine war began in 2022, prompting central banks worldwide to reconsider reserve asset safety.
| Historical Period | Reserve System | Gold's Role | Key Characteristics |
|---|---|---|---|
| Classical Gold Standard (19th Century) | Gold-backed currencies | Primary reserve asset (80%+) | Direct convertibility, stable exchange rates |
| Gold Exchange Standard (Interwar) | Gold + foreign exchange | Supplemented by sterling/dollars | Allowed monetary expansion beyond gold supply |
| Bretton Woods (1944-1971) | Dollar-centric system | Gold backing for dollar only | US pushed world toward dollar savings |
| Post-1971 Era | Floating currencies | Declining share of reserves | Dollar trust peaked in 1980s |
| Current Period | Multipolar transition | Rising share of reserves | De-dollarization accelerating |
Trust Erosion Catalysts
- $300 billion Russian asset freeze
- Congressional approval for asset confiscation
- Weaponization of reserve currency status
- BRICS members seeking alternatives
Central Bank Response
- Record gold purchases by central banks
- Diversification away from dollar assets
- Building sanction-resistant reserves
- Structural shift in reserve management
Market Implications
- Sustained institutional demand for gold purchases
- Reduced dollar demand over time
- Higher gold prices structurally supported
- Multi-year trend rather than cyclical shift
Historical Pattern
Central banks are currently buying record amounts of gold, driving up prices. This pattern resembles previous periods when international monetary systems underwent fundamental changes, typically resulting in sustained gold appreciation as confidence in existing arrangements declined.
Equity market cycles and currency debasement
Examining 120 years of US equity market capitalization relative to GDP reveals recurring cycles of credit-fueled bubbles followed by currency debasement reflected in higher gold prices. Current equity valuations suggest we're approaching another inflection point favoring precious metals appreciation.
Bubble-Debasement Cycle Analysis
The data reveals consistent cycles where easy money policies inflate equity bubbles, followed by currency debasement reflected in gold price appreciation. Central banks often overshoot in their monetary accommodation, planting seeds for subsequent bubbles. This creates a vicious cycle where fiat currency serves as the "air" inflating successive bubbles, leading to incremental currency decline and gold appreciation over time.
Cycle Mechanics
- Bubble bursts trigger monetary easing
- Central banks often overshoot stimulus
- Easy money inflates subsequent bubbles
- Currency debasement benefits gold
Current Market Position
- Equity/GDP ratio near historic peaks
- Multiple valuation metrics stretched
- Bubble characteristics increasingly evident
- Gold positioned for next cycle phase
Historical Precedent
- 1929, 2000, 2007 bubble peaks
- Subsequent gold rallies in each case
- Currency debasement policies adopted
- Multi-year gold appreciation followed
Exter's Pyramid Dynamics
These cycles exemplify Exter's pyramid widening during credit expansion (bubble formation) and reshaping during adjustment periods (gold price appreciation). The pattern repeats as policymakers choose currency debasement over deflation, making gold a consistent beneficiary of these recurring monetary cycles.
Investment Timing Implications
Current equity market valuations relative to GDP suggest we're probably close to peak bubble conditions, indicating significant gold price appreciation in coming years. Historical patterns show this relationship provides reliable timing signals for major asset class rotation from financial assets into real assets like gold.
Market outlook and price projections
The convergence of technical breakout signals, fundamental undervaluation metrics, and structural monetary system changes creates an exceptionally compelling case for sustained gold appreciation. Multiple independent indicators suggest we're at the beginning of a multi-year bull market with significant upside potential.
Chinese Central Bank Pattern
Historical analysis reveals the People's Bank of China purchased gold in the 1960s and 1990s before substantial price moves. Currently, the PBoC is buying "hand over fist" since 2022, suggesting potential institutional insight into coming currency devaluations.
Inflation Expectations
Gold serves as an inflation expectations indicator, with turnarounds in gold prices often followed by surging inflation within two years. Current patterns suggest similar dynamics developing, supporting sustained precious metals demand.
Debt Crisis Resolution
With global debt at $313 trillion (330% of GDP), inflation represents the most expedient debt restructuring method. This approach favors gold accumulation as a hedge against systematic currency debasement.
System Stress Indicators
- Real estate sectors collapsing globally
- Banking system failures increasing
- Central banks experiencing losses
- Credit boom inevitably followed by busts
Institutional Adoption
- Central banks buying for system stability
- Investment funds slowly following suit
- Pension funds increasing gold allocation
- Risk mitigation driving demand
Price Projection Framework
- Conservative target: $4,000-5,000/oz
- Crisis scenario: $8,000/oz potential
- System stabilization requires higher prices
- Decade-long appreciation cycle possible
Investment Strategy Implications
The analysis suggests strategic gold allocation and potentially silver positioning as complementary precious metals investments. The multi-year timeframe provides opportunity for systematic accumulation using dollar-cost averaging strategies while monitoring current gold prices for optimal entry points.
Long-Term Outlook
Based on comprehensive data analysis, the $8,000 per ounce projection for the decade ahead remains reasonable. This level would stabilize the financial system by restoring appropriate trust balance between credit instruments and real assets, while providing adequate backing for the expanded global money supply.
De-dollarization Acceleration
Congressional approval to confiscate Russian assets and transfer them to Ukraine could accelerate de-dollarization by BRICS members and other countries. Tensions between East and West suggest sustained support for higher gold prices and increased gold's share of international reserves at the dollar's expense.
Disclaimer: This analysis is for educational and informational purposes only and should not be considered investment advice. Gold and precious metals investments involve risk, including potential loss of principal. Past performance does not guarantee future results. Economic and geopolitical developments create additional uncertainties. Always consult with qualified financial advisors before making investment decisions.